The present description relates generally to the field of systems for and methods of pricing retail products and services. More specifically, the present description relates to systems for and methods of defining sales promotions for retail products and services.
Effective pricing of retail products and services is often a complicated task. In order to maximize profits, not only must revenue be optimized, but also the costs of inventory must be taken into account. One strategy used is to periodically reduce the price of the retail products or services in order to encourage sales of the retail products or services. The amount of the reduction is often set by a sales agent who has had experience in the market for the retail products and services and can, using his or her experience and intuition determine the timing and amount of markdowns.
In particular, the sale of seasonal retail products or services poses a high financial risk for merchants or service providers. This risk is even more acute in the retail business. Each seasonal item can be assigned a specific sales period. When high-fashion and fashion items are involved, the merchant wants to have as little remaining stock as possible at the end of the sales period, as it will be difficult to sell this merchandise even with markdowns. In this case, larger remaining stocks translate to higher losses. In addition to fashion items, such as pink raincoats, this also applies to other products, such as computer hardware.
For less “fashionable” products, the risk is lower because merchants can store any remaining stock and then try to sell it at the normal price again in the same season of the next year. Because storing inventories is expensive, however, merchants will generally prefer to sell their merchandise by the end of the regular sales period.
Merchants often use markdowns to ensure that the merchandise is sold out as completely as possible by the end of a season. Markdowns are price reductions or buyer's incentives aimed at promoting the sale of certain articles. Of course, markdowns reduce the gross margin, which means the revenue merchants earn for selling the merchandise is less than originally planned. Merchants usually plan a certain budget for markdowns that must not be exceeded. Accordingly, markdowns are applied restrictively in retail, which once again increases the risk of remaining stocks at the end of the season.
As discussed above, effective pricing of products is a complicated task which is often performed manually. For example, price adjustments in planning decisions may be used using manual selection systems. Further, a sales promotion may also be implemented in a manual or automated process. A promotion refers to a special event, retail sale, or other activity designed to reduce inventory. For example, spring sales events, two-for-one promotions, end-of-season sales, clearance sales, etc. are examples of sales promotions which may be used to reduce inventory. Sales promotions are different than a markdown controlling process which is not necessarily tied to an event or special circumstance.
An important objective in the pricing of products is to limit retail sales promotions to a minimum and apply them to the right products at the best suitable times and places and with maximum flexibility while ensuring that nearly all the merchandise is sold by the end of the season. To this end, merchants need to flexibly and efficiently implement and manage sales promotions at varying levels of detail. Thus, there is need for a system for and method of defining a sales promotion that is configured to facilitate storing, managing and reporting data regarding sales promotions and/or groups of related sales promotions at varying levels of detail.